Budget cuts will be more daunting

Published 12:00 am, Sunday, July 11, 2010

AUSTIN — Trying to carve billions of dollars from the state budget may seem tough enough, but the job will be even more challenging for lawmakers because of dollars they cannot easily touch.

When the current $182 billion, two-year state budget was written, just $87 billion was labeled state general-revenue money. The rest was federal money and other dollars, such as the highway fund and bond proceeds, the uses of which are tightly specified.

Even within the state general-revenue pot, all but about $17 billion was influenced or dedicated by the Texas Constitution, laws, regulations, court orders or funding formulas, according to the Legislative Budget Board.

When lawmakers writing the next budget grapple with a shortfall of up to $18 billion, the amount of restricted money is expected to be about the same.

That does not mean lawmakers will not make cuts in restricted areas. Such cuts, however, could mean losing federal matching dollars that help fund key services — such as health care — or require new legislation. It also does not mean they could eliminate everything funded with discretionary money.

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The net effect, though, is more pressure on programs whose funding has fewer strings, such as higher education.

Senate Higher Education Committee Chairwoman Judith Zaffirini, D-Laredo, said higher education “absolutely” could be vulnerable, but she added, “I hope that the higher education officials and higher education advocates will speak up loudly and clearly and make a good case for higher education actually being an investment” that benefits the economy.

Craymer said some areas of the budget cannot remain off-limits.

“There will be a lot of pressure on higher ed, but, ultimately, you cannot protect the same sacred cows that have been protected in years past and balance the budget through spending cuts,” he said.

“If they could completely stop everything that they have some flexibility over, that's still not enough to come up with $18 billion,” she said. “It obviously means they can't find $18 billion in cuts. They are going to have to use the rainy day fund.”

The rainy day fund is expected to have about $8.2 billion next year. The Texas Constitution requires a super-majority vote of lawmakers to spend rainy day money.

Senate Finance Committee Chairman Steve Ogden, R-Bryan, said he is not concerned about the bulk of the restricted money because it goes to programs the Legislature would want to fund anyway, and lawmakers can adjust funding levels.

“The only one that, at least in my mind, causes a lot of frustration is Medicaid, because Medicaid is an entitlement, and we have no discretion. We pay whatever it costs,” he said.

Lawmakers cannot restrict eligibility and must maintain certain services, although they can cut optional services, such as coverage for eyeglasses or hearing aids, said Stephanie Goodman, of the Health and Human Services Commission. They also can cut reimbursement rates to health-care providers in the Medicaid program.

Such cuts come at a cost, however. This year's human-services cuts of $205 million, including reimbursement-rate reductions, will cost an estimated $190 million in federal matching funds.

Ogden acknowledged that areas in which lawmakers have more discretion “are the areas that are most likely to receive increased funding when we have money and most likely to receive decreased funding when we don't.”

Zaffirini, a Finance Committee member who played a key role in softening cuts to Medicaid and CHIP when lawmakers faced a big shortfall in 2003, called the situation “extremely challenging.”

“What we have to ensure is that when we look at the funds over which we have authority, that we first and foremost identify all the need and think in terms of which we must protect. Which require increased funding? And then, where can we cut?” she said.

“Where can we cut in such a way that the cut is not as harmful or as hurtful as if we cut elsewhere? And what changes can we make that are temporary and can be restored when times are better? That's what we did in 2003.”